The cracker plant being built in Pennsylvania has passed another hurdle: Potter Township has approved permits to begin construction.  The process took longer than what one might have expected, with the Township holding extra meetings and requesting additional documents from the company on a couple of occasions.  The Township gave it’s approval with several important conditions, including compliance with a noise ordinance, traffic analyses, and the commission of a lighting study.  It seems the Township is actually concerned about effects other than economic effects.  That’s wise.

I have thing for small-scale stuff and for oil and gas tech, so I’m posting this here.  Up in north-central PA a company has put a small-scale liquefaction plant into use.  Since it seems to be a relatively new technology it’s probably rather expensive and so won’t see extensive deployment across the Marcellus/Utica region.  For clients whose minerals are in areas without pipeline infrastructure in place, this would be a solution to suggest to your oil and gas producer.

The analogy isn’t perfect, but this writer puts into words what I’ve been thinking about the current struggle between OPEC and U.S. frackers.

January 23: An oil leak in a major oil field in Kuwait has affected the production of oil.  Just like that, oil prices have jumped $1.00.  Let’s see what happens tomorrow, shall we?

I fully expect renewables to cut in to fossil fuel use eventually, and compete on the open market on price.  Every time I turn around, though, it turns out that some renewable project or other is not working the way it was supposed to.  The most recent one is out in California.  It was supposed to be primarily solar, with some natural gas to assist at night.  Turns out it’s using more gas than advertised.  Renewables are the future, but that future still looks to be distant.

January 25: Libya is opening up to outside investment to help with development of its oil fields.  Since Ghadaffi was deposed, oil development has been minimal, and closed to foreign investment.  This could help Libya start producing a lot of oil again in the long-term.  This news shouldn’t have much effect on the price of oil in the short-term.

President Trump has signed an executive order that will allow both the Keystone Pipeline and the Dakota Access Pipeline to move forward.  Both will transport oil, so shouldn’t have a direct effect on natural gas prices.  It may take some of the attention away from the Atlantic Coast and the Mountain Valley pipelines, so we may see less news about them in the near future.

January 26: The price at the pump went down ten cents today in Buckhannon.  I was not expecting that, as the price of oil hasn’t dropped significantly lately.

The US dollar is strong and likely to stay strong for the foreseeable future.  A strong dollar will always drive the price of oil down a bit.  However, since it’s strong and will likely stay strong, the real determining factor for the price of oil in the near future will be simple supply and demand.

Renewable energy has weathered an oil bust for the first time in my memory.  That suggests to me that renewable energy has reached a critical mass of sorts.  I expect renewables to become a larger source of electrical energy generation.  This article at the IEA suggests that worldwide power generation from renewables will be at 60% of worldwide power use by 2021.  I’m a little skeptical, but I’ll be watching renewables closely.

The folks over at oilprice.com see lots of money pouring in to the oil and gas industry.

American companies are putting rigs back in the patch, and investors expect an additional 315,000 barrels per day by the end of the year.  That won’t catch up with the 1.8 million barrels per day cut by OPEC.  It looks like OPEC’s cut is going to work for the time being.

Jan 4: Just like that, natural gas prices have dropped below $3.30/MMbtu.  Upcoming weather is expected to be warmer than normal, so the market is responding.  What the market seems to be forgetting is that natural gas production is still pretty low, and storage levels have been dropping more than expected.  It will be interesting to see what happens in the next week or two.

Cheap natural gas has been driving a resurgence in American manufacturing.

High natural gas prices are good for my clients–mineral and royalty owners.  One thing I’ve been concerned about lately is whether Trump’s policies are going to drive prices up, or drive prices down.  I’ve thought about it a lot but I haven’t been able to figure it out.  I’ve been thinking about whether coal might come back and challenge natural gas on price.  This article argues that coal is not coming back.  If that’s the case, my clients’ mineral and royalty rights will continue to be valuable.

This article comes from the American Petroleum Institute, so it’s probably at least a little slanted in favor of the oil and gas industry.  There’s probably a counter-argument of some sort.  Regardless, it says that the increased use of natural gas has lead to a reduction in carbon emissions related to electricity production.  The last time carbon emissions from electricity production were this low was 25 years ago.  Conclusion: natural gas is better for the environment than coal or oil.

Here’s some good speculation about the future of oil and gas prices.  Like all speculation, it’s probably not entirely right, but it’s probably not entirely wrong either.  It’s fun to read and think about.

This Forbers article is also some good speculation, but it’s more focused on natural gas and consequently, the American side of things.  Enjoy with a good does of salt.

This article is good speculation too, but only regarding the next calendar year so it’s less likely to be completely inaccurate.  It’s also a little more dense with industry and investment lingo, so it’s a little harder to read.  Enjoy……if you want.

Since we’re speculating, we should include the EIA’s speculation.  They are, after all, usually reasonably accurate.  Of course, when you’re predicting a price of between $35/bbl and $93/bbl in December of 2017, it’s not too hard to be right.  The good news is that oil and gas prices are expected to slightly increase.  That’s far better than large movements in price either direction.

This interesting Bloomberg article says there is way more gasoline in the United States than we actually need.  We’re exporting tons of the stuff.  Oddly, prices at the pump have gone up here in Buckhannon in the last few weeks.  Maybe they’ll go down in the next few weeks.  Who knows?  I’ve decided I have no idea how gasoline prices work.  It’s not going to stop me from trying to figure it out though.

Magnum Hunter went through bankruptcy last year.  The company has made a lot of important changes in the process.  The only thing that our clients really need to know about is that the company is changing its name to Blue Ridge Mountain Resources.  So if Magnum Hunter owns a lease you signed you will start to see correspondence from them under the new name.  You would think that as a part of that process they would notify people, but oil and gas companies are notorious for not notifying lessors when changes happen.  It’s nice to know who owns your lease.  That’s one of the reasons we ask them to add a clause to leases which requires them to notify you if the entity responsible for the lease changes.

Turns out production is going up in the Marcellus/Utica region.  Who’d a thunk it?  Prices go up.  Production goes up.  My hope is that producers can keep their development in line so that they don’t push us into another unsustainable price bubble.  The good news is that the number of DUCs (Drilled but UnCompleted wells) has gone down.

This Seeking Alpha article by HFI Research does the math and determines that we’re going to need some increased production and decreased demand this year for natural gas or we’ll end the year without enough gas in storage for the winter.  That sounds like a recipe for higher prices and increased production.  That means there will be more leasing, and more people calling us to help them understand what their lease says.  We’re gearing up to help everybody we can.

This MarketWatch article deals with the question that a lot of people have regarding the oil markets this year: will U.S. shale oil be able to replace the cuts in production that OPEC has made?  Their answer, no.  Shale oil is expected to take too long to ramp up production, and even when it does the market should have already rebalanced.  It’s hard for me to say whether that will be the case.  I think we’ll just have to wait and see on that one.

Saudi Arabia says the current OPEC production cut isn’t going to last.  It’s intended to be a six month deal, and won’t be extended.  Since a lot of the cut was production that was unsustainable, according to some sources, this may just mean that OPEC countries will slowly bring new production online once the deal has expired.  Interestingly, Saudi Arabia is said to have cut more than what they agreed to, and says that other countries have done the same.

Jan 18, 2017: Prices since the beginning of the year have been as low as $3.09 and as high as $3.50.  It’s been volatile.  Warm weather coming up will probably drive prices down again, but the outlook for the year is that prices will remain above $3.00/MMbtu and may push into the $4.00 range a little at times.

Happy New Year everyone!  We hope your Christmas was excellent and that the coming year will be better than the last one.

Dec 20, 2016: The U.S. dollar has hit a 14 year high.  This affects the oil and gas industry because oil is purchased in U.S. dollars.  When it’s strong, the conversion rate for other currencies is unfavorable.  That means other countries don’t have as much purchasing power.  One of two things has to happen, either other countries don’t buy as much oil, or the price of oil drops to make it possible for other countries to buy the oil they need.  A third option is for the other countries to pony up more of their currency to buy the oil they need, but that will eventually drive demand down.

With some political stability in place, Libya is increasing oil production.  This was expected by those agreeing to cut production in the last OPEC deal, however, it’s a much bigger increase than expected.  This doesn’t seem to have affected the market much, as prices are still at over $53/bbl.

WVU has finished a study on the noise pollution produced by fracking.  It says that the noise levels produced can increase sleep disturbance, cardiovascular disease, and annoyance.  Seriously, annoyance.  The article over at WVU’s web site goes into it a little bit, and it’s interesting.

Jan 3, 2017: We saw natural gas prices get up over $3.90/MMbtu before the New Year break, but today they are down at $3.30.   Essentially, the market hit a high point that was unsustainable, and is on its way back down.  January weather is not expected to be as cold as it was expected to be a week or two ago, and oil drilling is picking up, so there is plenty of gas.

There are a number of articles out there trying to predict the future of oil and gas, specifically for 2017.  While it’s extremely difficult to predict what’s going to happen with any degree of certainty, lots of people still try to do it.  So far, it seems that most everyone agrees that oil prices won’t rise much, and will likely fall at some point this year.  Natural gas prices will probably remain above $3.00/MMbtu, but are unlikely to go above $4.00. So, not a bad year, but not a good year either.  The real problem for West Virginia mineral and royalty owners is the same one we’ve seen for years.  We don’t have enough pipeline capacity to move the gas out of the area.  If there were more pipelines, we would see increasing bonus amounts and royalties.  I think all my clients would be happy with that.

It’s the end of the day on December 1, 2016 and natural gas prices have broken $3.50/MCF.  Impressive.  I really hope that price holds.  We have cold weather coming up in the next few days, so it probably will.

A Reuters article says that a lot of U.S. producers can produce oil and make money below $40/bbl.  One area of the Bakken can even turn a profit at below $15/bbl!  Those are numbers that rival Middle Eastern numbers.  We may never see Saudi Arabia and OPEC power return, assuming we get more renewable energy sources built up in the next few decades.

For those interested in the environment, the natural gas industry is growing on pace to make it so that we will meet Paris accord emissions targets, even if Trump goes back on that agreement.  That’s naturally, market driven, with no regulations or government mandates required.  You could argue that coal regulations and renewables subsidies are forcing the market, but it appears that coal was already being phased out, and renewables are a pretty small part of the energy sector still.

Part of OPECs plan to cut 1.2 million barrels per day in production is to have non-OPEC countries also cut production by 600,000 barrels per day.  Russia may not play ball.  We’ll see what is said during the meeting on December 9.

A company called Blue Racer started shipping NLGs down the Ohio River to the Gulf Coast back in October.  That’s great news for West Virginia royalty and mineral owners, since it’s a way of getting product out of West Virginia (it comes from the Natrium plant on the WV side of the Ohio) to a new market.  The interesting thing about that is that not too long ago, there was a big stink about shipping produced water (water that comes back up the well after fracking) on the Ohio River, but there hasn’t been a peep about NGLs.  Seems like NGLs would be far worse to ship, but what do I know?

A Reuters article says that Vladimir Putin was involved in getting Saudi Arabia and Iran to work together for the recent production cut/freeze agreement.  If that’s the case, then it’s very likely that Russia will also cooperate.  What will other countries do?  If they all cooperate, then we could have a real production cut.  Good news for U.S. producers!

There’s a very good story at FinancialTimes.com that goes into some detail about how the production cut/freeze agreement came about.  It’s well worth the read.

There are some people out there saying that the production cut/freeze deal may succeed.  They base their argument mainly around the fact that OPEC and Russia both need higher prices.  OPEC didn’t expect the price of oil to fall as far as it did, and has been hemorrhaging money because of it.  So it seems like the main arguments for and against are:  It won’t succeed because all of the OPEC members cheat historically on these kinds of deals, and Russia’s oil production is partially privatized.  It will succeed because OPEC members all need a higher price for oil, Vladimir Putin will strong-arm his cronies, and the private side of Russian production needs high oil prices too.  It’ll be interesting to see what actually happens.

The cracker plant over in Ohio has reached another milestone.  The property has been cleared of the old industrial plant, ready for new construction.  The company has not come to a final decision, but since the cracker plant in Pennsylvania has been approved it’s expected that the Ohio one will be, too.  This is excellent news for us in West Virginia.  Greater demand for natural gas will increase the price, driving up royalty payments and bonus payments.  The more they want your mineral rights the better a deal you’ll be able to wrangle from them.  Too bad we can’t seem to make progress on the cracker plant in West Virginia.

December 12, 2016: Russia has agreed to participate in the oil production/freeze.  Oil prices have jumped $1.33 per barrel.

December 19, 2016.  Oil prices are at about $52/bbl, and natural gas prices are only at $3.40/MCF.  The natural gas price is surprising.  Considering the cold weather crossing the United States, I would have expected something closer to $3.75/MCF.  We’ll take a look at why in the next edition.

The energy sector is cautiously confident, according to this article at Fortune.com.  The key phrase from a quote in the article is, “We’re beginning to put capital back to work…”.  That means investors are willing to put money into the industry.  That means that work will start to pick up, development will increase, jobs will be provided, hydrocarbons will be produced.  However, I’m even more glad that there is caution in the industry.  That means we may not see an extreme boom/bust cycle soon.  When things move slowly, people can plan for it and prepare for it.  You can plan for a career.  When things move fast, nobody benefits–even the money men lose sometimes, and that’s saying something.  Here’s to cautious confidence in the oil and gas industry.

The Wolfcamp formation in the Permian Basin in Texas is not new, but we now have some new data that shows it will be ridiculously prolific.  Here is a very short write-up about it.  It’s interesting to see how new technologies have changed the future of oil and gas production.  Previously, there were a lot of people who were worried about “peak oil”, the idea that the world was running out of oil to produce.  The theory said, in essence, that on a specific day (which varied according to who was doing the calculating) we would produce the most oil ever, and never be able to produce more.  It seems we have put off peak oil for quite a while.  New technology, namely horizontal fracking, did it.

Here’s an article from Japantoday.com that says Trump is unlikely to ban Saudi oil.  It gets into the history of OPEC for a while, but the practical reasons for not banning Saudi oil are interesting.

There is some slight chance that the next OPEC meeting in Vienna on November 30 could result in a production freeze or cut.  This article by Richard Zeits over at Seeking Alpha gets into some detail about it, but the short version is that all producers stand to benefit from increased prices.

While Donald Trump plans to make significant changes to the Clean Power Plan, there’s at least one energy company CEO who thinks it won’t make a difference.  Gerry Anderson of DTE Energy in Michigan says that DTE is making the change over from coal to natural gas (and renewables) regardless.  Anderson also says that he doesn’t know anybody who is building a new coal plant.  While this is great news for the northern part of West Virginia, the southern part of the state is still hurting badly from the loss of coal-related jobs.  Luckily, there are a couple of new metallurgical coal mines being opened up on the West Virginia/Virginia border.  If I were reliant on the coal industry for my livelihood, thought, I’d be figuring out how to make a change quick.

It’s November 29, the day before the next OPEC meeting.  Saudi Arabia has proposed a 4.5% cut for itself if Iran will freeze at 3.8 million barrels per day and if Russia will agree to cut production.  That’s a pretty aggressive stance, and Iran has unsurprisingly resisted that proposal, with oil prices falling over $1.50 per barrel on that news.  This article says that Saudi Arabian Energy Minister Khalid Al-Falih is setting the stage for failure because he doesn’t like Trump’s campaign promise to ban Saudi oil imports.  While Trump’s campaign promises are looking more like suggestions these days, it makes sense to set someone else up as the scapegoat.  However, when going in to negotiations you always set your expectations high, and that’s what Saudi Arabia has done.  Any cut/freeze combo right now would bring prices well up over $50/bbl for at least a few months.  Attacks on Nigerian pipelines have boosted prices this month, and Nigeria doesn’t provide a huge number of barrels to the world market.

The United States became a net exporter of natural gas in the last couple of months.  Most of the exports went through pipelines to Mexico and Canada, but some went overseas in the form of LNG from the Sabine Pass plant in Louisiana.  This shipment of LNG to China, for example.  Additional LNG plants are expected to come online in late 2017 and in 2018, so exports should continue to pick up.

Good news for the Marcellus/Utica area, but mostly the Ohio portion of it.  The REX pipeline is about to expand from 1.8 billion cubic feet per day to 2.6 billion cubic feet per day.  It won’t have a direct effect on West Virginia, but any added capacity from the area is better than none.

Japanese environmentalists are excited about increased fracking in America, and oppose nuclear power.  American environmentalists are pretty much the opposite.  Kind of interesting.

November 30, 2016: The early news is that OPEC has agreed to cut production by 1.2 million barrels per day. That is shocking, to say the least.  Oil prices are up by $3.30 already, and the day has hardly begun.  It will be interesting to see if the price continues to climb throughout the day, or if the markets will think that is enough of a jump.

The highest change that we saw today was $4.40/bbl.  Markets closed at $3.35/bbl higher than they had opened.  Seems $4.40 up was just a little too much for the markets.

December 1, 2016:  Oil is up another dollar and fifty cents this morning.  The price at my local gas station went up ten cents overnight.  As usual, gasoline prices go up a lot faster than they go down.

Some articles about the Wolfcamp formation have come out saying that it will be uneconomic to produce at current ($45/bbl) prices.  The numbers he used look conservative, as horizontal wells can and do regularly drain more acreage than he allows for.  However, his main point stands: the hydrocarbons are worth a lot of money, but nobody in the media took the time to figure out how much it would take to get out of the ground.

Great news for West Virginia mineral and royalty owners!  The price of natural gas is up over $3.40/MCF this morning!  Those are excellent, healthy numbers, and should result in a nice increase in royalty check numbers.

Since it’s the first of December, a quick look at the winter forecast is worth doing.  Pretty much everybody agrees that it’s likely to be a little colder than average in the north, and about average across most of the country, with the south above average.  Since the majority of natural gas use comes in the Northeast and Midwest, that should indicate that we’ll use up a lot of natural gas this winter.  We can expect higher natural gas prices because of that.  Natural gas prices probably won’t climb up to $4.00/MCF this winter, but I wouldn’t be too surprised to see them break $3.70/MCF or even $3.80/MCF for long periods.

Oil prices have been dropping, getting below $44/bbl at one point.  All because nobody believes OPEC will be able to put a production cut deal in place.

Donald Trump has won the Presidency, and nobody’s exactly sure what that’s going to do for oil prices.  This CNBC article throws out a few of the things that are going to factor in, such as a weakening dollar, better relations with Russia encouraging investment in Russian oil infrastructure, and Trump possibly re-instating the sanction on Iran.  Overall, the article thinks the price of oil will go down.

One source thinks that natural gas prices could rise above $25/MCF this winter.  The article doesn’t specify, but I suspect that’s the price to consumers, not the price at a hub.  Still, that’s considerably more than the current price to consumers.

Gas production for the United States as a whole dropped a lot in October.  The disappointing news is that the Marcellus/Utica region decreased production because it didn’t have anywhere to send the gas. This in spite of the Cheniere Energy gas-to-liquids plant in Louisiana ramping up.  Based off this article, we’d say that the southern part of the country is going to see higher natural gas prices, while the northern part of the country is going to see lower natural gas prices.

Deep sea rigs are being taken out of idle in a place called the Cromatry Firth, a natural deep harbor near the North Sea oil fields.  Since oil prices are down off their high of $52/bbl, it’s safe to assume that the oil industry foresees demand for oil increasing in the next year.  You don’t fire up deep sea rigs without a really good reason.

Oil prices have been as low as $42/bbl in the last few days, but are back at $45/bbl today, November 15, 2016.

The big news, of course, is yet to come.  Between now and our next update OPEC will meet and announce that it has not agreed to cut back or freeze production.  Kidding.  They surprised me last time with a framework for a deal.  Since then, of course, key players have walked back from that framework.  But the fact that they were able to get a framework in place makes one think that it’s possible they could get an actual agreement.  We’ll see.  I still think it’s highly unlikely.  Oil futures traders are hopeful, though.  That’s probably why oil prices are up to $45/bbl.

Hope everyone has a great Thanksgiving holiday next week!

Fracking companies have been increasing the length of the horizontal lateral in an attempt to increase efficiency; building one pad and using one hole to access more acres should be economically efficient.  However, a study by Bernstein Research shows that longer laterals are not necessarily more efficient.  The culprit is friction.  More pipe creates more resistance.  The result is a lower average peak rate, or put in other words, the highest amount of production you could expect from a well at it’s best is lower.

On the other hand, adding more sand (“proppant”, because it props the cracks open) to a well increases the production from the well.  That seems to be a pretty logical conclusion, since larger and (presumably) more cracks means more product can move through the formation to the well.  However, adding more proppant is a recent change.

Natural gas developers added 11 new rigs across the U.S. last week, which is a good thing at this point.  Production has been falling for a while, and new sources of production are needed to keep numbers up.  11 new rigs will probably not halt the falling production numbers, but will slow it.

Iraq is now saying it won’t cut production.  Just like that, oil prices fall.  We’re below $50/bbl again.  Now, Iraq could just be positioning for negotiation, or it could be serious.  Their excuse is that they need money to fight terrorists.  $50/bbl oil isn’t too bad for them right now, as they are still working to get production back up to pre-sanction levels.  So it’s hard to say what they will do at the next meeting.  Most experts expect Saudi Arabia to cut production anyways, so maybe Iraq will just continue to produce and take advantage of Saudi Arabia’s unilateral cuts.

Stephen Tindale is a former leader of Greenpeace, and he’s saying that fracking is an important technology, and should be encouraged.

On October 24, 2016, gas prices have dropped well below $3.00/MCF.  Last week saw warm, but not hot, weather.  This week is going to be quite cooler, so we should see a jump in prices before this gets published on November 1.

Costs for drilling gas wells are still dropping.  That means that even in a low price market it makes sense to keep drilling and producing gas.  That’s exactly what Antero is doing.  They have announced that instead of producing 1.75 billion cubic feet of gas per day during 2016, they are actually going to produce 1.8 billion cubic feet of gas per day.

It’s November 2, 2016, and oil prices and natural gas prices have fallen significantly since last month.  Oil prices have dropped for the same reasons they always do (supply/demand), but the details are unusual.  Essentially, there were a few weeks where there were drawdowns on oil storage, then all the oil that everyone expected to be there during those weeks suddenly showed up and we had the largest increase in oil storage in 34 years.  Also, the price of oil jumped when OPEC announced it would cut production, then dropped when Iraq announced it wouldn’t participate in the cut.  Is anybody really surprised by that?  The result of these factors was that prices dropped from over $50/bbl to around $45/bbl.  Regrading natural gas we have hit the “shoulder season”, the time between summer (storage) and winter (high use) where storage numbers always go up.  Temperatures were comfortable, so gas use was low, and traders for some reason decided to sell natural gas futures.  This Seeking Alpha article seems to think that traders overshot the fundamentals of the market, so the price will go back up.  Right now we’re at about $2.75/MCF.  Not horrible for gas production in West Virginia, but also not good.

Every time you turn around there is something new being built that is being powered by natural gas.  One recent example is three cruise ships being built for Carnival Cruise Lines.  They’ll be powered by liquid natural gas, which is far cleaner a fuel than what a lot of them are powered by, bunker oil.

Drilled but uncompleted wells (DUCs) are being completed.  Rumors are that by January the DUCs in the Marcellus area will be gone.  The EIA has begun publishing the estimated number of DUCs, and the Marcellus numbers don’t indicate zero DUCs by January 2017.  In fact, as of the end of August 2016 there were still 642 DUCs, down from 658 in July for a change of -11.  Even if you count January 2017, that’s only six months at 11 wells per month for 66 wells total, leaving 592 wells.  Obviously the rate of change is going to change month to month, but it’s going to have to grow an awful lot to get to zero wells left by January 2017.

A deep-water project by Statoil in the North Sea is producing oil at $10/bbl.  That’s competitive with Saudi Arabian oil.  It’s all because of standardization.  Previously, a lot of oil industry equipment was made to order.  Efforts have been made to use off-the-shelf components.  The savings are huge.  The implications are also huge.  Deep-sea projects were the most expensive projects, and consequently the first to get the ax in the recent price wars.  If they can all be made this cost-competitive, the Saudis are going to have to worry about deep ocean oil reserves affecting the market as much as they have to worry about American reserves.

An article at ArabToday.net does a good job of summarizing the supply/demand balance for natural gas in the United States.  I was a little surprised by the source, since Arabs are in the business of producing oil, but hey, guess they keep tabs on the industry at large.

The National has a good analysis of the Septmeber Algeirs OPEC meeting and its ramifications.

One thing I’ve often wondered about is why fracking hasn’t caught on better in other places?  The answer is a bit complex, involving governments, politics, investment capital, and geology.  The latter appears to have killed shale drilling in Poland, which was very excited about the prospect for a number of years.  Other countries are still working on it, such as China, but aren’t having great success as yet.  It’s something to keep an eye on.

So, after OPEC announced that they were going to agree on a price freeze at their next meeting in November, the price of a barrel of oil worked it’s way up to $52/bbl.  Then, Russia announced that it was not going to cap production and the price dropped to (so far) $50/bbl.

Saudi Arabia played everybody.  This article from the Wall Street Journal says that the Saudis were going to cut production anyways, so getting other countries to agree to a production cut really didn’t change anything for the Saudis!  The Kingdom was already producing at record highs, and those high production numbers were apparently not sustainable.  If no deal had been reached, production would have dropped off anyways.  This way, it looks like OPEC still has power to influence world oil prices.

This article over at Fortune.com says that OPEC’s influence is significantly reduced from what it used to be.  It also points out that quite a few OPEC countries would have reduced output naturally if the recent agreement had not been reached.

Just like that, there’s news that rig counts in the United States have risen.  That news is keeping oil prices from rising any farther, in fact, as of today, October 17, 2016, at 10:00 a.m., the price of oil is under $50/bbl.  After the news of OPEC’s agreement to cut production, the price of oil rose to about $52/bbl, then started a slow, steady decline.

I’ll be shocked if prices stay above $50/bbl until the next OPEC meeting in November.  After that meeting, the price of oil will probably rise to about $55 or $60, and then drop off as American companies scale up production.  That’s my free prediction for the near future, take it for what it’s worth.

There has been a lot going on in oil and gas these past two weeks, so we’re going to go ahead and post this a couple weeks early.

If Libya were to start producing a lot of oil again, it would probably drive the price of oil down some.  There was some expectation that they would start up again soon, but that expectation is now gone.  A general has seized control of all the oil ports in Libya, in opposition to the coalition government.  The government had been losing popular support for some time.  Perhaps the general will step in and take control of everything and start production back up.  Even if he does, it will take some time.  We don’t expect Libya to affect oil prices for the rest of this year.

Venezuela says that OPEC and non-OPEC countries (Iran) are close to an agreement that would limit oil production.  We’re still skeptical that an agreement will be reached.  After all, there was some belief that the Doha meeting back in April would be successful, though I rather suspect that was more wishful thinking on the part of some people than reliance on facts.

It seems that Libya is producing oil again.  Reports of two tankers with a total of over a million barrels of oil have left the country.  A Libyan official has stated that they will be producing 600,000 barrels per day within a month, and over 900,000 barrels per day by the end of the year.  If that actually happens it will drive the price of oil down some.  Whether it actually happens is not something I would bet on.  Libya is a pretty unstable country after all.  I’d let time tell on this one.

A surprising number of American companies have been able to avoid bankruptcy during the downturn in oil and natural gas prices.  They’ve had to cut costs and increase production.  One of the major factors in increasing production has been increasing the amount of sand that is flowed into the fracks.  The linked article goes into some detail that would be interesting if you’re thinking of investing in sand supply companies.

There is a lot of data in this study by Deloitte.  The long and short of it is that the oil and gas industry looks like it’s coming back.  Higher prices for both oil and gas are expected in the next couple of years.  This jives with what we’ve been reading and experiencing.

Iran has doubled exports from last year.  Libya and Nigeria are ramping up exports as well.  The increase in production from those countries is going to drive the price of oil down.  OPEC is meeting to discuss the possibility of freezing production.  Perhaps (but I really think this is a stretch) the specter of prices dropping below $40/bbl again will drive OPEC to actually come to an agreement.

On the other hand, this article from the Financial Post makes the case for a crazy future for oil prices.  Basically, it says that the lack of investment in new fields/projects is going to come back to haunt us.  It’s worth taking five or ten minutes to read.

While the oil market is interesting, the natural gas market is what really drives development in West Virginia.  There isn’t as much written about the natural gas market as it’s not a worldwide commodity with political ramifications.  It’s slowly becoming more so.  This article over at Forbes talks about how Japan’s use of natural gas is likely to rise, contrary to what most analysts think.  Sure hope so.  A lot of Japan’s natural gas will come from the Marcellus/Utica area.

Along the same vein of thought, Cheniere Energy has announced that it’s second liquefaction train at the Sabine Pass plant in Louisiana has reached Substantial Completion.  In other words, they can start liquefying gas with it.  This is interesting for us here in WV because gas from the Utica/Marcellus area will feed the Sabine Pass plant.  Demand is growing!

This article from Reuters says that while demand is growing, production is dropping off.  We’re looking at a future of stable prices for natural gas, at least for the time being.  It will be interesting to see what happens through this next winter.

That was quick, but hardly unexpected.  The price of oil is dropping on news that Iran has rejected a deal with Saudi Arabia that would have limited it to producing under 4 million barrels per day.  Iran was producing 4.1 to 4.2 million barrels per day before it had sanctions imposed on it, and it is producing about 3.6 million right now.  Iran has always stated that it wants to get back to producing over 4 million.  Talk has now turned to OPEC’s November meeting.  Do I go out on a limb and predict that OPEC will not agree to a production freeze in November?  Sure, why not.  With the understandable caveat that unpredictable events could change things.

Michael Lynch over at Forbes argues that the long-term price of oil is impossible to determine.

Jim Willis of Marcellus Drilling News attended a conference where two analysts discussed whether the Marcellus/Utica area is going to be able to make up for the slow down in gas production from other parts of the country.  Long and short, no.  There are a lot of very interesting bullet points in the article.

USA Today ran a story about wind farm projects not getting off the ground.  Part of the problem has to do with how the BLM allocates property.  The more interesting part of the story was that of 46 wind farms approved by the Obama administration since 2009, only 15 have made it into operation.  That kind of track record is going to keep wind power from competing with natural gas for a long time.

So, we were wrong about OPEC!  They agreed to agree to a production freeze at their meeting in November.  Seems there are some details to work out in the interim.  As a result, the price of oil has climbed consistently the last few days.  It hasn’t hit $50/bbl yet, but that seems almost inevitable.  Interestingly, the price of oil has hit $50/bbl once already this year.  If I recall correctly, that was also on speculation that a production freeze was in the future.  Will they end up freezing production?  Maybe.  I still rather doubt a production freeze will happen.  It just doesn’t make sense when American production companies can ramp up production pretty quickly and you’re giving them two months heads-up.  But I was wrong about this, I could be wrong about that, too.

This article over at RealMoney.com poses the question, “have American producers achieved sustainable profits?”  It doesn’t give an answer, but points out that Saudi Arabia is probably in a world of hurt either way.  It’s short and worth the read.

Chesapeake is by far and away the largest producer in the Utica Shale at 1 million acres, 146,000 BOE of production per day, and having drilled 588 new wells in 2015.  Check out the chart in this article.

It’s August 18, 2016 and oil prices continue to rise based on mere speculation that OPEC and Russia will freeze oil production.  I’ll believe that when I see it.  Gas prices are on the rise because of lower than expected storage numbers.  That makes sense.  Oil prices on the rise because OPEC is talking, yet again, about freezing production doesn’t.

This article from Seeking Alpha suggests that $50/bbl oil is here to stay.  It gives three reasons, one of which is that investors are very willing to invest in oil and gas companies still.  That is one thing that I had been wondering about.  If investors had not been willing to do so, we could have seen serious decreases in production in the near future.  Since they’re willing to, we’re a lot less likely to see a serious decrease in production and a corresponding increase in oil and gas prices.  While the article is written with oil in mind, you could easily replace the numbers for oil with numbers for gas and get the same story.

Another article from Seeking Alpha (sometimes they’ve got a lot of great stuff) is predicting that gas prices are going to continue to move higher.  If you like to read stuff from a commodity trader’s point of view, this is an article for you.

Today is September 1, 2016.  Oil prices are still hovering around $45/bbl, and gas prices are still hovering around $2.75/MCF.  We’ve seen a significant increase in the number of inquiries from potential clients who’ve been offered oil and gas leases lately.  The most interesting was an Antero Resources lease in Monongalia County.  Northeast Natural Energy has been working in Monongalia County for about a year, in the same area that Antero is working.  If NNE is interested in making some money by flipping their leases, they timed it just right.  This is good news for anybody who signed leases with NNE, because another company showing interest in the same area means that there’s good potential for production there.  We hope you Monongalia County, WV mineral rights owners get great royalty checks in the very near future!

OPEC will be meeting this month to announce that they have not reached a deal to freeze production.  Oil prices will fall when that news is announced.  Saudi princes selling oil prices short will make a bundle.  If I knew enough about trading commodities, I would make a bundle, too.  Actually, I probably wouldn’t because everybody else with half a brain will be selling short at the same time.  Or maybe I just showed my lack of knowledge about how trading commodities works?  It doesn’t matter, I do West Virginia oil and gas law.

This article has as its thesis that OPEC no longer has the power to control oil and gas prices.  I agree.  The article is interesting because it discusses the current state of the oil and gas industry, much the way this blog post does.  It’s worth a few minutes to read.

It’s September 15, 2015 and the price of gas is at $2.91/MCF and the price of oil is $43.70/bbl.  Prices have been relatively stable lately.  Drilling seems to be picking up just a little bit nationwide as the rig count has gone up a bit.  Leasing has definitely picked up in West Virginia.  We’ve picked up several new lease negotiation clients this week.  While interest in leasing up property in the northern panhandle is picking up, it also seems to be picking up in the old core, consisting of Ritchie, Tyler, Doddridge, and Harrison counties.  We’ve also run across a lease from Antero Resources in Monongalia County, which is a new interest for them.  Previously, Northeast Natural Energy and EQT were the only companies working in that county.

We’re looking forward to seeing what happens with the OPEC meeting in Algeria on September 26-28.  We fully expect them to announce that they will not be curtailing or freezing production.  We also fully expect lots of people to speculate that they will.  It would be great for American producers if they did, as that would drive prices up and give American producers an opportunity to start drilling again.